Ok Tedi’s nightmare
BHP decided around 2001 that it wanted to exit its problematic Ok Tedi mine in Western province. By the time the decision was implemented a year later, the company was part of the much larger BHP Billiton Group, now the world’s largest resources company.
At the heart of this decision was the company’s desire to disassociate itself from the horrific environmental impacts its mining operations had created along the Ok Tedi and Fly River systems. Contrary to the advice it had received prior to the start-up of the mine in the 1980s, the 80,000 tonnes of tailings dumped daily into the river was too much for the ecological system to bear.
The fine tailings, created by the ball mills, settled along much of the river bed and, during periods of flooding, were transported over wide expanses of pristine, virgin forests areas. The resulting dieback has affected a vast forest area covering around 1,200 sq km.
Prior to the BHP decision to quit the operation and hand its 52% equity to the locally owned PNG Sustainable Development Program Ltd (PNGSDP), the World Bank had conducted a report which suggested that closure of the mine was the best course from an environmental standpoint.
But it agreed this disregarded complex socio-economic issues. Landowners, who were widely consulted, agreed they wanted the mine to continue its operations so they could contain to count on the economic benefits it provided through payment of royalties and other company-sponsored programmes.
The World Bank recommendation and the Ok Tedi decision were both made in spite of the expectation at the time that the environmental damage of the vast river system was likely to get worse even after if the mine shut down immediately. The damage is anticipated to last some 200 to 300 years.
Clearly one benefit of the continued existence of the mine has been its ability to continue to study, and where possible, to try and mitigate some of these impacts. Indeed in the last couple of years, a new and even more potent threat emerged in the form of acid rock drainage, the impact of which could be even more devastating.
They create what some people refer to as “moonscapes”, an example of which can be seen in the vicinity of Queenstown in Tasmania.
Ok Tedi Mining Ltd has responded by investing several hundred million dollars in a new facility that will extract sulphur from the tailings prior to dumping it in the river system. The extracted sulphur is to be piped downstream to the Biga area to be safely buried beneath the water table.
If the mine had shut down as the World Bank and BHP Billiton had intended, the likely impacts of acid rock drainage could have been too terrible to contemplate. When the Melbourne-headquartered multinational pulled out of the venture, its company executives had been aware that the final years of the mining operation were likely to be the best on record.
Unlike most deposits of this nature, the copper-gold ore grades held up very well as the deposit got deeper in the final years of operation. But what the company, and possibly anyone else, did not foresee was the huge increase in copper prices that would take place in subsequent years.
Because of this, the Ok Tedi mine has provided several years of windfall revenues to the PNG Government in the form of corporate taxes and dividends with thousands of landowners benefiting from huge royalty payments.
None of the stakeholders had envisaged the huge amount of funds that would be amassed by PNGSDP, which was mandated to invest two thirds of its dividend income in a long-term fund for the benefit of landowners and Western province once the mine was shut down.
The other one-third is being used for development projects in Western province and elsewhere in PNG. Various stakeholders and interest groups have been taken care off through these arrangements.
The PNGSDP has become somewhat of a shadow government with its own development agenda, but after some five years of existence, it is difficult to assess how successful it really has been.
Bottom Line, however, would like to express concern that not enough attention has been given in these arrangements to longer term environmental impacts.
OTML, which includes some of PNG’s best trained and highly qualified professionals, is certainly doing an exemplary job in its mining operations. There is a glimmer of hope that underground mining, on a somewhat smaller scale, may proceed after the likely closure of the mine around 2013-14.
While an immediate solution appears to have been found for the acid rock problem, one has to worry that not enough attention is being given to the wider scale damage that has eventuated and, indeed, the danger that tailings dredged from the river could provide a possible flash point for future ARD problems.
Now that the mining operation is flush with record cash flows, it seems a prudent time to consider a significant long-lasting fund that can be used to better understand and deal with the wider environmental damage especially after the mine is shut down.
Three of the seven PNGSDP directors are appointed by BHP Billiton, one of whom has been a high profile executive of the Australian Conservation Foundation.
The environmental damage caused by the mine does not seem to be a concern of PNGSDP at the present time – it probably comes more under the purview of the mine operators – nor does it seem to have a role in this regard after the mine shuts down.
This is a critical problem that should not be left solely in the laps of this or future PNG Governments.
Some serious soul searching needs to take place right away. Catastrophe could strike the next time there is a severe drought, possibly early in the next decade, or in the aftermath of the one after that.
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